Category: Financial News

Have you heard about those IRS phone scams? No, it’s not what you’re thinking; not scams sponsored by the IRS. They are scams perpetrated by individuals posing as IRS personnel, and they have been more prevalent than ever in the past couple years. If you haven’t heard of them then maybe the IRS isn’t being aggressive enough with its public announcements and warnings. If you do know about these schemes then maybe you have pondered the questions “Who are these people that pay thousands of dollars to phony IRS agents? Can’t they tell it’s a scam? How can someone be so gullible?”

I have definitely had these kinds of thoughts, that is until reading the story of Halah Touryalai, staff writer for Forbes. She was recently contacted by one of these scam artists and almost fell for it. This is an expert on finance and investing; somebody who should probably know better. And even though she stopped short of doling out the $5,000 that they were demanding of her, they definitely had her going. This is somebody who has always paid her taxes and never had a reason to doubt herself. It only goes to show that if these scam artists call with enough urgency and authority in their voices, they can successfully dupe just about anybody.

Touryalai was told a whole host of lies on the phone that day:

The IRS had launched an investigation against her

She had attempted to defraud the government by not reporting all her income

She could avoid further action if she paid $4,900 within the next hour

Be careful out there! As long as you know how the real IRS operates, you’ll be fine. The IRS will never demand that you make payments over the phone. They will rarely contact taxpayers by phone without first sending notices by mail (and certainly not for a measly $4,900!).

The IRS clearly stated that they will not be issuing any new levies during the lapse in appropriations. This applies to automated levies that are generated by ACS (Automated Collection System) as well as those issued by live field agents. However, the caveat there is that some levy notices appear to have gone out after the government shutdown because they were post-dated. If a particular levy notice was actually issued prior to the IRS closing its doors, then it will be impossible to get it released for the time being. Also, “intent to levy” notices (those that warn taxpayers of future levy risks) will continue to be mailed out by the automated system.

But we know that at least some IRS personnel continue to work through the shutdown. What are they doing?

cashing your checks

conducting criminal investigations

issuing emergency levies & seizures

Emergency collection actions usually involve situations where collection of the tax is in jeopardy: for instance, where the CSED (Collection Statute Expiration Date) is approaching and the IRS is on the verge of forever losing an opportunity to collect a substantial tax debt. Even during normal operations, the IRS is quite selective in what it deems a “jeopardy” situation. So during the IRS closure, this scenario would be “extremely limited” according to the IRS.

Because our elected representatives can’t do their job, the government has shutdown. The Internal Revenue Service (IRS) is not immune from the shutdown … but you are still responsible to make payments and meet IRS deadlines.

Curious as to how the government shutdown would impact the IRS collection officers I face off against on a daily basis; I started to make my normal phone calls to the IRS today. The IRS practitioner’s line has a pre-recorded message acknowledging that it is closed due to the government shutdown. The standard collections phone number used by the public at large has a pre-recorded message that it is having technical difficulties. I called a small sample of Revenue Officers that I know and got their voice messages (no surprise there). I also called a couple of the duty lines at my local IRS office. The duty lines were not staffed. One had a rather funny message recorded either yesterday or today, acknowledging the government shutdown and then the person recording the message was either yanked off the phone or spat a profanity into the message.

According to the IRS website, they softly acknowledge the government shutdown as follows:

“Due to the current lapse in appropriations, IRS operations are limited. However, the underlying tax law remains in effect, and all taxpayers should continue to meet their tax obligations as normal.”

Individuals and businesses should keep filing their tax returns and making deposits with the IRS, as they are required to do so by law. The IRS will accept and process all tax returns with payments, but will be unable to issue refunds during this time. Taxpayers are urged to file electronically, because most of these returns will be processed automatically.

If you have an upcoming appointment scheduled with the IRS, you should assume that the appointment is cancelled and will be rescheduled. The IRS will also continue to send its scary collection notices; however, correspondences received will not be reviewed (again, not a real surprise announcement).

I suppose what I’m really waiting for is for a prospective client to contact me with a stack of IRS levy notices that were issued at the eleventh hour on September 30, 2013 by an IRS official knowing they were going on a forced holiday for an undetermined amount of time.

With the individual mandate element of ObamaCare going into effect in 2014, some people who are currently without health insurance may be wondering if they should begin looking into joining the ranks of the insured. We now know what the penalty will be for failure to secure insurance, so there will certainly be those who do a little cost/benefit analysis. As the deadline creeps up on us, perhaps some are also wondering why. Why is there a penalty at all?

If you aren’t already aware, Americans will be required to obtain health insurance beginning in 2014 or else pay a tax penalty of up to $95 per adult and half that for each child, or 1 percent of the household income, whichever is greater. And if you still don’t have coverage by 2016, you’ll pay as much as $695 per adult and $347 per child pursuant to the individual mandate.

What I really like about the PBS article is the plain-language explanation of the “why.” For the health care overhaul to work, there has to be a broad base of participants. If everybody participates, including the young and the healthy, then the rates will (ideally) remain low. If coverage were not mandatory, then there would be an inordinate number of sick, high-cost participants which would drive the price of insurance through the roof.

However, opponents of the individual mandate believe that the penalty isn’t severe enough to ensure anything near 100% participation. Some people will certainly weigh their options and risk a penalty that will be lower than a health insurance premium, especially if the IRS is not going to do too much to enforce the individual mandate.

The Foreign Account Tax Compliance Act (FATCA) was enacted in the wake of the UBS scandal to crack down on tax evasion overseas. “FATCA requires foreign financial firms to report to the IRS offshore accounts held by Americans that are worth more than $50,000.

Foreign financial institutions that fail to comply with FATCA face a 30-percent withholding tax on their U.S. source income, a penalty that could effectively freeze them out of U.S. financial markets.

FATCA does not take effect until July 2014, but there have been many steps leading up to it, including this latest step: the registration process. Remember though, the registration process is not an individual tax requirement but, rather, is meant to secure the cooperation of financial institutions. If you are a in charge of a foreign bank, investment firm, or insurance company and you need to know, the schedule of events appears to be as follows:

Registration may be done on paper, but the IRS highly encourages that it be done through their secure online web application. Once a firm has registered, the IRS issues them a Global Intermediary Identification Number (GIIN). Registration ensures that the IRS knows who to call when they have questions about suspected tax cheats.

There are so many elements involved in operating a successful business, only some of which are controllable by the owner. You need a good business plan, adequate capital investment, not to mention an excellent product or service. You also need to figure out how you’re going to market that product or service. Of course, it helps if you have a head for business; some people just seem to “get it.” But even these measures do not ensure success because so much depends on timing and luck.

One element that people tend to overlook when they start a business is the tax consequences and requirements. No luck involved here. And, thankfully, you don’t really need to have a knack for numbers or a specialized knowledge of tax laws to make sure the tax aspects of your business are in order. What you do need is a basic understanding of what tax requirements apply to your business and where to go for answers.

Some small business owners consult with a tax accountant or a tax attorney in the opening and operating of their business. But if you’re not in a position to hire a tax professional, there are still excellent resources at the IRS, especially this week.

It is National Small Business Week 2013 and the IRS is offering two free webinars, one on June 18th and one on June 20th. The June 18th webinar is entitled “Small Business Owners: Get All the Tax Benefits You Deserve” and the June 20th webinar will cover the topic of “common mistakes.” If you don’t have a chance to register and watch live, the IRS will be archiving both webinars on the IRS Video Portal.

Interested in hearing President Obama’s self-congratulatory introduction to National Small Business Week? In a minute and a half he lists everything his administration is doing to help small businesses succeed. Me neither. But here’s the link anyways:

There is a general, overriding principle in the world of Federal Tax that goes something like this: if you voluntarily come forward to admit your prior tax shenanigans and get yourself back in the good graces of the IRS, there will be less negative consequences than if the IRS catches you trying to get away with it.

This principle holds true with respect to the reporting of foreign bank accounts. Taxpayers who are caught hiding assets in foreign accounts are subject to criminal prosecution, and could very well face jail time. But under the IRS voluntary amnesty programs, those who come forward and disclose their offshore assets are promised they won’t go to jail in exchange for payment of penalties that are based on a percentage of their account balances.

There are some who want to get back on the grid without having to pay hefty penalties. They do this by making a so-called “quiet disclosure” of foreign assets; they report their foreign accounts without giving the government information about accounts held in previous years. This type of disclosure sometimes tricks the IRS into believing the accounts are brand new.

According to a recent report by the Government Accountability Office (GAO), there may be more quiet disclosures happening around the nation than the IRS has the ability to identify. The IRS is taking tips from GAO on how to detect more of these quiet disclosures.

News that Facebook would be receiving a $429 million tax refund was of course misinterpreted by the general public. The consensus among those who just don’t understand the complete story is that a company as profitable as Facebook should never be able to get out of paying taxes — not with so many ordinary folks who are up to their necks in tax debt, and not in this economic climate.

But Facebook did pay taxes. According to its 2012 annual earnings report, Facebook says it paid some $2.86 billion in taxes. So let’s get our facts straight before we go around defriending anyone. See full story here.

By now you probably know that the dreaded fiscal cliff has been averted, at least for a month or two.

The term fiscal cliff refers to the potential for a deeper recession that would have been triggered by the terms of the Budget Control Act of 2011 which was scheduled to go into effect on January 1, 2013. It was thought that if the Bush-era tax cuts were allowed to expire, thereby raising taxes for virtually everybody, at the same time that mandatory governmental spending cuts were scheduled to be implemented, there would be a devastating impact on the U.S. economy such that the economy would be in a free-fall … over the cliff.

The government narrowly avoided the fiscal cliff by passing the American Taxpayer Relief Act in these first days of 2013. The compromise that was reached focused primarily on tax relief and not spending cuts. The main impact will be on those taxpayers who are considered wealthy. However, if you were paying attention during the presidential campaigns, you will notice that the income threshold for those who are considered “wealthy” increased significantly from the time of campaigning to the thresholds established through this deal.

The next political hurdles are the negotiations on the spending cuts and the debt ceiling. Very simply, the debt ceiling is the maximum amount that the federal government can borrow at any given time and in-turn, pay its obligations that have already been incurred. If a compromise cannot be reached, the economy may go off the fiscal cliff despite the recent deal. Congress has about two months before it must raise the debt ceiling or risk causing the government to default on its bills and financial obligations. If a deal is not made, a federal government shutdown is possible. This may include suspension of the payment of federal benefits and payroll, in addition to the shutdown of government departments such as the Internal Revenue Service, during the height of tax season… of course.

In these days of FATCA and offshore accounts, for some it is hard to imagine those days when the preferred place to hide money was under a mattress or in a backyard hole. There could be many reasons for wanting to conceal one’s true wealth, but few of them tend to be very honest. Although, I suppose some people just don’t trust themselves to spend their own money responsibly.

The technicians at Clark & Rush, a Sacramento-based heating & A/C company, found $300,000 worth of gold dust packed away in 12 old baby food jars. They happened upon the stash in September while doing an installation on an old home in Sacramento. The gold dust was given to the homeowners who requested that their names not be made public. Looks like somebody has some secrets.

Some people try to illegally hide money and assets from the IRS, and there is literally no end to the creativity. But whether it is done in an effort to pay less taxes or to escape the collection arm of the IRS in an asset seizure situation, it is the wrong approach to tax relief. No competent tax relief attorney will ever advise you or help you to do this. A tax attorney will assist you with tax avoidance so that you pay only as much as you are legally required to pay, but will never help you with illegal tax evasion.

Attorney Advertisement. Tax Attorneys Montgomery & Wetenkamp are licensed by the State Bar of California, are licensed attorneys authorized to practice before the United States Tax Court, and may practice before the Internal Revenue Service (IRS) as attorneys in all 50 states. Sacramento Tax Attorneys and Modesto Tax Attorneys Montgomery & Wetenkamp perform all services in Sacramento, California and Modesto, California. The content of this website is for informational purposes only and does not constitute legal advice. The tax information contained on this website, is not intended to be used, and cannot be used, referred to or relied upon, for the purpose of avoiding tax-related penalties under the Internal Revenue Code or promoting, marketing, or recommending to another party any tax-related transaction or matter addressed herein. Past successes cannot be an assurance of future successes because each case must be decided on its own merits and will differ if based on different facts. Full disclaimer provided on our disclaimer page and is incorporated herein by reference.

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